A Mystery: Who Are the Dewey Secret Seven?

Matthew Goldstein

Thursday, 20 Mar 2014 | 6:58 AM ETThe New York Times

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They are the mysterious seven: former employees of Dewey & LeBoeuf who pleaded guilty to taking part in a four-year plan to manipulate the financial statements of the once prominent law firm, but whose identities and plea agreements are being kept under wraps by New York prosecutors.

When Manhattan District Attorney Cyrus R. Vance Jr. announced this month the filing of a 106-count indictment against three former top executives at the law firm and a low-level employee, the disclosure that he had also secured pleas and potential cooperation from seven people in the nearly two-year investigation was a surprise.

But the decision to keep their names secret even after the four accused — Steven Davis, Dewey's former chairman; Stephen DiCarmine, its former executive director; Joel Sanders, the former chief financial officer; and Zachary Warren, a former client relations manager — had been arrested and charged is striking some in the legal world as even more surprising. Defense lawyers say the continued sealing of those cases is akin to the way prosecutors often handle organized crime cases or an undercover investigation.

(Read more: Ex-Dewey LeBoeuf law firm execs charged in alleged fraud)

"It's not the typical process," said Alafair S. Burke, a criminal law professor at the Hofstra University School of Law and a writer of crime novels. Ms. Burke said she could understand the prosecutors wanting to keeping secret the names of people who had pleaded guilty if there was a fear of witness-tampering or witness intimidation. But that seems unlikely in what is essentially a white-collar accounting fraud case, she said.

Scott Eells | Bloomberg | Getty Images

The Dewey & LeBoeuf LLP logo is displayed in front of the company's offices in New York, May 3, 2012.

"It is unusual to have the pleas sealed at this juncture and in the context of this case," said Christopher E. Chang, a defense lawyer and a former Manhattan assistant prosecutor.

Defense lawyers said Mr. Vance's approach to unsealing guilty pleas was markedly different from the one employed by Preet Bharara, the United States attorney for Manhattan, in the government's insider trading investigation. These lawyers said that federal prosecutors would move swiftly to unseal cooperation agreements once the target of an insider trading investigation had been arrested and charged.

The New York Times has filed motions in New York State Supreme Court to unseal the criminal cases of four "John Does" and two "Jane Does," who are believed to be six of the seven former employees to have pleaded guilty in the case. The case for the seventh person could not be identified from the state court's online docketing service.

In court papers, The Times said news organizations and the public have a right of access to criminal proceedings that "can be abridged only in carefully defined circumstances."

Erin Duggan Kramer, a spokeswoman for Mr. Vance, declined to comment, noting that the state prosecutors would explain their reasons for keeping the matters sealed in their reply to the unsealing motion.

The number of pleas secured by Mr. Vance from people who waived the right to a trial is striking for a financial crimes case. In the nearly 10-year insider trading investigation of SAC Capital Advisors, for instance, federal prosecutors secured guilty pleas from six traders and analysts who once worked for Steven A. Cohen's hedge fund.

The seven pleas from former Dewey employees would suggest that the accusations of financial manipulation at the law firm, which at its peak employed more than 1,300 lawyers before collapsing in bankruptcy in May 2012, were not isolated incidents. The pleas also indicate that authorities have put together a case that will not rest solely on emails, in which some of the defendants openly talked about "cooking the books" at the law firm.

It is expected that some of the seven people who have pleaded will testify against the defendants at trial, said people briefed on the matter who spoke anonymously because they were not authorized to discuss the case publicly. These people said the identities of any cooperating witness and any plea deals they had reached with prosecutors would eventually need to be turned over to lawyers for the defendants.

But some lawyers have suggested Mr. Vance may be trying to keep the pleas under wraps as long as possible to avoid having to reveal whether his office agreed to any sweetheart deals with cooperators who might have avoided prison time, or allowed them to plead to a misdemeanor as opposed to a felony.

Three of the seven people whom Mr. Vance's office has taken pleas from are Francis Canellas, the firm's former finance director; Thomas Mullikin, the firm's former controller; and Ilya Alter, who was the firm's director of budgeting and planning, said the people briefed on the matter.

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CNBC's Scott Cohn reports top executives at Dewey & LeBoeuf have been indicted on grand larceny and fraud charges.

Mr. Canellas and Mr. Mullikin were named as defendants in a parallel civil case filed by the Securities and Exchange Commission in connection with a 2010 sale of $150 million in bonds by the law firm. Regulators contend that the former Dewey executives participated in a scheme to mislead investors in the bond offering about the financial health of the law firm.

Mr. Mullikin, until a few days ago, was the controller for another large law firm, Paul, Weiss, Rifkind, Wharton & Garrison. Lisa Green, a spokeswoman for the firm, said Mr. Mullikin no longer worked there.

The people briefed on the matter said the two women who had taken pleas and were identified as "Jane Doe" on the court docketing service both worked in the firm's billing and revenue departments.

Prosecutors say the accounting games at Dewey began in November 2008, not long after the merger was completed, and continued until March 7, 2012, shortly before Dewey filed for bankruptcy. The firm found it could not meet provisions in bank loans that required it to meet certain cash-flow projections as revenue slumped badly during the financial crisis. To make it appear as though Dewey was meeting those loan conditions, the top executives schemed to make a series of fraudulent accounting entries that either increased revenue, decreased expenses or appeared to rein in distribution payments to partners, prosecutors said.

Mr. Vance's office contends that Mr. Davis and Mr. DiCarmine, known as "the Steves" within the law firm, and Mr. Sanders were the architects of that plan, which was intended to keep the law firm afloat long enough for the economy to turn around and revenue to began to pick-up.

One person who has not taken a plea and apparently will not be charged with participating in the accounting scheme is Dennis D'Alessandro, the former chief operating officer at Dewey and part of the executive team that oversaw the firm's financial operation along with Mr. Davis, Mr. DiCarmine and Mr. Sanders.

Bruce Barket, the lawyer for Mr. D'Alessandro, said his client "didn't commit a crime and didn't plead guilty." He added that Mr. D'Alessandro had been extensively interviewed by authorities and would be prepared to testify at trial if subpoenaed.

Still, not all lawyers were critical of Mr. Vance's decision to keep the seven guilty pleas sealed. Marc Mukasey, the lawyer for Dr. Sidney Gilman, the crucial witness in the federal government's successful insider trading prosecution of the former SAC Capital portfolio manager Mathew Martoma, said cooperating witnesses are never eager to see their names in the news.

"In the absence of damage to an ongoing undercover operation, it is highly unusual for the actual guilty plea and the documents that go along with it to remain under seal," said Mr. Mukasey, who heads the white-collar defense practice at Bracewell & Giuliani. "But as a defense lawyer, the longer I can keep my client's name out of the public disclosure, usually the better."